Shire plc
(
SHPG
) posted second-quarter 2012 earnings (excluding special items) of
$1.68 per American Depositary Share (ADS), beating the Zacks
Consensus Estimate of $1.52 per ADS. The reported quarter's
earnings were up 26% from the year-ago figure due to higher
revenues.
Revenues increased 14% to $1.21 billion, above the Zacks
Consensus Estimate of $1.19 billion driven by higher product
sales.
Quarter in Detail
Product sales went up 16% to $1.15 billion. Products that
performed well during the quarter include Vyvanse (up 43% to $266.2
million), Replagal (up 3% to $123.2 million), Vpriv (up 31% to
$82.7 million) and Intuniv (up 16% to $69.1 million).
Firazyr sales were $31.7 million, up 58.5% from the previous
quarter. Dermagraft, which was added to Shire's portfolio following
the Advanced BioHealing Inc. acquisition, generated revenues of
$52.4 million in the quarter.
Adderall XR's second-quarter sales decreased 9% to $133.9
million due to lower prescription demand and destocking of the
drug. We note that in June 2012, the US Food and Drug
Administration (FDA) approved the abbreviated new drug application
(ANDA) filed by Actavis for its generic version of Adderall XR.
Actavis is in the process of being acquired by
Watson Pharmaceuticals Inc.
(
WPI
).
The company has two authorized generic partners -
Teva Pharmaceuticals
(
TEVA
) and
Impax Laboratories
(
IPXL
). We believe that the entry of additional generic versions of
Adderall XR will impact Adderall XR revenues unfavorably.
Royalties decreased 11% to $56.3 million. The decrease in
royalty revenue was primarily due to a fall in 3TC and Zeffix
royalties (down 6% to $10.6 million) and Adderall XR (down 5% to
$25.7 million).
Research & development (R&D) costs climbed 20% to $205.2
million. The increase was attributable to the company's efforts to
develop its pipeline. Selling, general & administrative
(SG&A) expenses increased 5% to $409.6 million. The higher
SG&A expenses were due to inclusion of Advanced BioHealing
Inc.'s costs.
Outlook
For 2012, Shire expects revenues and earnings to exhibit
double-digit growth. Product sales are expected to grow in the
low-teens in 2012 (previous guidance: mid-teen range). Foreign
exchange movements and generic competition for Adderall XR are
expected to hamper product sales.
Royalty income, along with other revenue, is expected to decline
25% - 35% (previous guidance: 15% - 25%) due to lower royalties
from Impax Lab. Post the approval of Actavis' generic version of
Adderall XR, Impax Lab is liable to pay significantly less
royalties to Shire.
Gross margins are expected to be slightly lower than 2011. Shire
expects 2012 combined R&D and SG&A expenses (adjusted) to
increase in the range of 10% - 12% (previous guidance: 12% - 14%)
on a year-over-year basis.
Our Recommendation
We currently have a Neutral recommendation on Shire. The stock
carries a Zacks #3 Rank (Neutral rating) in the short run.
The threat of generic competition, which several of Shire's
products are already facing or are likely to face, puts immense
pressure on the company's pipeline.
Shire is seeking to boost its pipeline through acquisitions and
collaborations. Even though encouraged by Shire's efforts to
develop its pipeline, we prefer to remain on the sidelines until we
get more visibility its development.
IMPAX LABORATRS (IPXL): Free Stock Analysis
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SHIRE PLC-ADR (SHPG): Free Stock Analysis
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TEVA PHARM ADR (TEVA): Free Stock Analysis
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WATSON PHARMA (WPI): Free Stock Analysis Report
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